The Oracle/PeopleSoft Case: Unilateral Effects, Simulation Models and Econometrics in Contemporary Merger Control

An increasingly important part of contemporary merger control both in the US and the EU is unilateral effects analysis, particularly with regard to oligopolistic mergers. In practice, this requires econometric analyses of past market data and, above all, the construction of simulation models in order to quantify the price effects in each specific case. The review of the merger between the software firms Oracle and PeopleSoft in 2003/04 has been the most important instance of parallel application of these sophisticated economic tools by the EU and US authorities so far. This makes an in-depth study of the case going from the controversial issue of market definition to the specificities of the competitive assessment worthwhile. Therefore, we highlight certain similarities as well as (minor) differences between the EU and US proceedings. Interestingly, despite serious initial concerns the transaction was not blocked nor even required to be modified in the two jurisdictions. We derive a number of interesting insights and, in particular, point out problems and lessons associated with the use of sophisticated economic tools in contemporary merger control. In addition to case-specific factors, the major insights encompass the continued relevance of market definition, the need to accompany predictive economic evidence with compatible reasoning and the benefits of including the economics of dynamic and evolutionary competition.Merger control, unilateral effects, econometric analysis, simulation models, market definition

The Oracle/PeopleSoft case: unilateral effects, simulation models and econometrics in contemporary merger control

An increasingly important part of contemporary merger control both in the US and the EU is unilateral effects analysis, particularly with regard to oligopolistic mergers. In practice, this requires econometric analyses of past market data and, above all, the construction of simulation models in order to quantify the price effects in each specific case. The review of the merger between the software firms Oracle and PeopleSoft in 2003/04 has been the most important instance of parallel application of these sophisticated economic tools by the EU and US authorities so far. This makes an in-depth study of the case going from the controversial issue of market definition to the specificities of the competitive assessment worthwhile. Therefore, we highlight certain similarities as well as (minor) differences between the EU and US proceedings. Interestingly, despite serious initial concerns the transaction was not blocked nor even required to be modified in the any of the two jurisdictions. We derive a number of interesting insights and, in particular, point out problems and lessons associated with the use of sophisticated economic tools in contemporary merger control. In addition to case-specific factors, the major insights encompass the continued relevance of market definition, the need to accompany predictive economic evidence with compatible reasoning and the benefits of including the economics of dynamic and evolutionary competition. --Merger control,unilateral effects,econometric analysis,simulation models,market definition

Building and investigating generators' bidding strategies in an electricity market

In a deregulated electricity market environment, Generation Companies (GENCOs) compete with each other in the market through spot energy trading, bilateral contracts and other financial instruments. For a GENCO, risk management is among the most important tasks. At the same time, how to maximise its profit in the electricity market is the primary objective of its operations and strategic planning. Therefore, to achieve the best risk-return trade-off, a GENCO needs to determine how to allocate its assets. This problem is also called portfolio optimization. This dissertation presents advanced techniques for generator strategic bidding, portfolio optimization, risk assessment, and a framework for system adequacy optimisation and control in an electricity market environment. Most of the generator bidding related problems can be regarded as complex optimisation problems. In this dissertation, detailed discussions of optimisation methods are given and a number of approaches are proposed based on heuristic global optimisation algorithms for optimisation purposes. The increased level of uncertainty in an electricity market can result in higher risk for market participants, especially GENCOs, and contribute significantly to the drivers for appropriate bidding and risk management tasks for GENCOs in the market. Accordingly, how to build an optimal bidding strategy considering market uncertainty is a fundamental task for GENCOs. A framework of optimal bidding strategy is developed out of this research. To further enhance the effectiveness of the optimal bidding framework; a Support Vector Machine (SVM) based method is developed to handle the incomplete information of other generators in the market, and therefore form a reliable basis for a particular GENCO to build an optimal bidding strategy. A portfolio optimisation model is proposed to maximise the return and minimise the risk of a GENCO by optimally allocating the GENCO's assets among different markets, namely spot market and financial market. A new market pnce forecasting framework is given In this dissertation as an indispensable part of the overall research topic. It further enhances the bidding and portfolio selection methods by providing more reliable market price information and therefore concludes a rather comprehensive package for GENCO risk management in a market environment. A detailed risk assessment method is presented to further the price modelling work and cover the associated risk management practices in an electricity market. In addition to the issues stemmed from the individual GENCO, issues from an electricity market should also be considered in order to draw a whole picture of a GENCO's risk management. In summary, the contributions of this thesis include: 1) a framework of GENCO strategic bidding considering market uncertainty and incomplete information from rivals; 2) a portfolio optimisation model achieving best risk-return trade-off; 3) a FIA based MCP forecasting method; and 4) a risk assessment method and portfolio evaluation framework quantifying market risk exposure; through out the research, real market data and structure from the Australian NEM are used to validate the methods. This research has led to a number of publications in book chapters, journals and refereed conference proceedings

Methodological approach to study the dynamics of production networks: Discrete-event simulation modelling

This paper shows how discrete-event simulation represents an appropriate tool for approaching the dynamics of production networks. Three important factors influencing production network dynamics, specifically finite production capacity, manufacturing lead time, and its variability are discussed and a basic discrete-event simulation model is presented. Such model, which in its basic form represents a simple retail/distribution two-stage supply chain, is then extended in order to take into account those factors that can not be included in a classical control theoretical model

Socio-hydrological modelling: a review asking “why, what and how?”

Interactions between humans and the environment are occurring on a scale that has never previously been seen; the scale of human interaction with the water cycle, along with the coupling present between social and hydrological systems, means that decisions that impact water also impact people. Models are often used to assist in decision-making regarding hydrological systems, and so in order for effective decisions to be made regarding water resource management, these interactions and feedbacks should be accounted for in models used to analyse systems in which water and humans interact. This paper reviews literature surrounding aspects of socio-hydrological modelling. It begins with background information regarding the current state of socio-hydrology as a discipline, before covering reasons for modelling and potential applications. Some important concepts that underlie socio-hydrological modelling efforts are then discussed, including ways of viewing socio-hydrological systems, space and time in modelling, complexity, data and model conceptualisation. Several modelling approaches are described, the stages in their development detailed and their applicability to socio-hydrological cases discussed. Gaps in research are then highlighted to guide directions for future research. The review of literature suggests that the nature of socio-hydrological study, being interdisciplinary, focusing on complex interactions between human and natural systems, and dealing with long horizons, is such that modelling will always present a challenge; it is, however, the task of the modeller to use the wide range of tools afforded to them to overcome these challenges as much as possible. The focus in socio-hydrology is on understanding the human–water system in a holistic sense, which differs from the problem solving focus of other water management fields, and as such models in socio-hydrology should be developed with a view to gaining new insight into these dynamics. There is an essential choice that socio-hydrological modellers face in deciding between representing individual system processes or viewing the system from a more abstracted level and modelling it as such; using these different approaches has implications for model development, applicability and the insight that they are capable of giving, and so the decision regarding how to model the system requires thorough consideration of, among other things, the nature of understanding that is sought

Barriers to Entry

Entry of firms into a market is an important economic mechanism that influences industry dynamics and contributes to allocative and dynamic efficiency. However, there are barriers that can prevent companies from entering a market, hampering the competitive process. Therefore, it is clear that barriers to entry are an important issue in competition policy. In this report, we studied a number of 37 different barriers with a special focus on the possible size effect of the barrier, the sustainability of the barrier, the way it can be measured and the relation with other barriers to entry.

Optimal Foreign Reserves, The Dollar Trap and Demand for Global Safe Assets: A DSGE analysis for China

The recent surge of foreign reserves in emerging markets has sparked fierce debate about what level of reserves is the optimal amount for a country. Conventional models have achieved important advances in understanding the behaviour of central banks’ reserve policy, but fail to find convincing solutions to the puzzle of why emerging economies, and China in particular, would continue to accumulate massive reserves. With reference to China’s massive hoarding of foreign reserves, this thesis develops a representative agent model with elements of dynamic stochastic general equilibrium (DSGE) modelling. The model constructed in this thesis explicitly considers the risky steady state as the equilibrium point when agents take into account future uncertainty but when the shock realizations are zero. In this risky steady state we derive the optimal reserves for emerging markets, with particular reference to the Chinese case. The precautionary savings motivation for holding reserves is then analysed within this framework. This thesis derives the optimality of Chinese reserve accumulation, and provides a plausible explanation for reserve build-up in China and its underlying driving forces. In order to better understand the foreign reserves accumulation, this thesis further attempts to analyse current external wealth allocation in a portfolio perspective within a DSGE framework. A two-country model is employed, and a Value at Risk (VaR) constraint is introduced to reproduce the risk averse behaviour of investors. After accounting for risk diversification, our findings imply that an investor would shift their portfolio holding to bond related assets. Finally, China has accumulated a huge amount of foreign reserves. The majority of these assets are denominated in the US dollar. Furthermore, in terms of asset type, the US T-bill is the dominant investment instrument in China’s international portfolio choice. This raises questions as to why the central bank of China chooses to make such an investment decision, and what the global repercussions might be. Therefore, China’s role in the growing demand for global safe assets deserves exploration. Given the world-wide shortage of global safe assets, to what extent China will continue the current international investment decision, and the driving forces behind such policy inertia, are major concerns. In order to gain a better understanding, this thesis applies a global solving method, as well as a standard local solving method

Understanding social innovation in local energy transitions processes: A multi-case study

Social innovation (SI) in local energy transitions is gaining focus in current times but energy transitions have not yet been explicitly analysed in the context of SI. Our objective is to characterize SI in co-created local energy transitions processes through the study of three distinct cases based on energy transitions in localities in Sweden (Sk\ue5ne and Dalsland) and Denmark (Hj\uf8rring). In these localities, municipality actors (MA) are engaged in increasing the adoption of solar PV systems, uptake of EV and biogas cars, and phasing out oil-burners, respectively. We analyse the three cases by following the work of the MAs and through the frame of Transformative Social Innovation (TSI), which consists of four shades; social innovation, system innovation, game-changers, and narratives of change. Subsequently, we use causal loop diagrams to characterize the SI in the oil-burner phase-out case. We see shades of SI and system innovation but there are no ‘game changers’ or ‘narratives of change’ yet in any of the cases

Price Links between Auction and Direct Sales of Fresh and Frozen Fish in North Norway (1997–2003)

In North Norway the dominant method of exchange for fresh and frozen fish at the ex-vessel level is by direct (contract) sale, whereby price is negotiated between fish processors and the fishermen. More recently, an auction for frozen fish has been introduced. In this paper we investigate the relationship of prices between these methods of exchange and, in particular, whether the prices develop in a stable pattern between auction and direct sale by means of a cointegration analysis. Monthly prices of size-graded cod and haddock landed in the period 1997–2003 are analysed. For most months, frozen fish sold through auctions realised the highest price, followed by direct sales of fresh and frozen, respectively. Fish sold by auction exhibits a larger monthly variation in price than fish sold directly. Prices for cod were cointegrated to a larger degree than for haddock, and the cointegration was strongest for frozen cod. The analysis also demonstrates that the auction prices for frozen cod and haddock drive the direct sale prices of similar fish, both frozen and fresh, even though the quantity sold via direct sales is greater than that of auctions. Law of one price (LOP) and weak exogeneity were present for cod and haddock.Market linkages, cointegration, auction sale, direct sale, fresh fish, frozen fish, cod, haddock, North Norway, Resource /Energy Economics and Policy, Q22, C32, D44,